(Policy Interpretation) Policy Interpretation of Interim Measures on the Pilot Program of Qualified Foreign Limited Partnership in Beijing
The Interim Measures contains 21 articles in five chapters, i.e. General Provisions, Pilot Application, Pilot Operation, Supervision and Management, and Supplementary Provisions. Several key points are specified in the document as follows:
First, a pilot joint audit mechanism is established. This mechanism includes the Business Administration Department of the People's Bank of China, Beijing Foreign Exchange Management Department of the State Administration of Foreign Exchange, Beijing Local Financial Supervision and Administration, and Beijing Municipal Bureau of Market Supervision and Administration. The responsibilities of the audit departments are clarified respectively.
Second, the qualifications are prescribed for the application for the pilot fund management companies, pilot funds, and QFLP. Either domestic or foreign-funded entities are allowed for pilot funds and management companies. Pilot fund management companies may set up and issue multiple pilot funds which mutually support flexible quota allocation.
Third, the investment scope of pilot funds is defined. In addition to the equities of unlisted companies, investments are allowed to enter the PIPE market, mezzanine investment, private equity, non-performing assets, as well as other businesses permitted by laws and regulations such as China's private equity funds.
Fourth, information disclosure system, capital custody system, and information reporting system are established to strictly manage investors' suitability and continuously monitor the dynamics of capital.
The revisions draw upon the experience and practices of other provinces and municipalities, and are kept in line with the latest policies, China's industrial regulatory requirements, Chinese laws and regulations (such as the Foreign Investment Law, the Interim Measures for the Supervision and Management of Private Investment Funds), as well as current industrial and regulatory practices.
First, it broadens the scope of foreign investors, and for the first time includes cross-border RMB in the QFLP pilot program.
Second, it allows more flexible management structures for pilot funds and further scales down a single pilot fund to CNY 100 million.
Third, it further relaxes the scope of investment. Pilot funds are permitted to invest in preferred stocks, debt-to-equity swaps and convertible bonds, mezzanine investment, private placement bonds, non-performing assets, China's domestic private investment funds, etc.
Fourth, it simplifies the application process. The registration process, which is run by Beijing Local Financial Supervision and Administration, provides a variety of one-to-one dedicated services when it comes to investment registration, registration and filing with China Foundation Association. The most prominent of these services is the "one-stop acceptance" that supports immediate acceptance and review upon application. The backend review adopts a joint mechanism run by Beijing Local Financial Supervision and Administration, Business Administration Department of the People's Bank of China, Beijing Foreign Exchange Management Department of the State Administration of Foreign Exchange, and Beijing Municipal Administration for Market Regulation, mainly to review the qualification and quotas of the applicants. Interested applicants may contact Beijing Local Financial Supervision and Administration on application matters.Fifth, it coordinates risk prevention and control and innovative developments. It regulates to improve in-process and ex-post supervision mechanism, and guide pilot enterprises and custodian banks to report enterprise data and relevant information in due manner. It also emphasizes to improve environment for doing business and efficiently coordinate services to ensure lawful and sound development of enterprises in Beijing.(All information in this document is authentic in Chinese. English is provided for reference only. In case of any discrepancy, the Chinese version shall prevail.)(Source: Beijing Local Financial Supervision and Administration)